Finance Minister Constantinos Petrides expects to see the Cyprus economy bounce back from the pandemic with 4.5% GDP growth in 2021 following a 5.5% contraction during last year’s health crisis.
Addressing Invest Cyprus 5th International Investors Summit on Thursday, the Minister said although making projections at a time of uncertainty as the pandemic poses risks, he argued there was good reason to expect the economy to rebound.
He said reasons behind the government’s optimism are “the substantial support measures” introduced.
Admitting that the country’s unemployment rate is currently high at 8%, he said it is expected to drop to 7% within the year.
“Public finances have seen a sharp increase in debt, but this has of course been the case in all EU Member States as support measures and health protection during the pandemic crisis had to be financed,” Petrides pointed out.
Public debt is expected to rise to 120% of the country’s GDP, up from 95% in 2019, due to increased government spending to shore up the economy, combined with reduced state revenue.
But he stressed the significant rise in public debt is attributed to high bond issuances to strengthen the government’s cash reserves which currently amount to 20% of GDP.
The Finance Minister argued the government has followed a “sane policy” while handling the crisis.
“Credit rating agencies have praised Cyprus for keeping public finances at this level”.
“Our policy is to place public debt on a declining trend as of 2021 onwards, expecting public debt to decline to around 98 per cent of GDP by 2023,” said Petrides.
He said that despite the pandemic setback, the government’s priorities have not changed.
“That is achieving macroeconomic stability, implementing prudent fiscal policies, ensuring financial stability, and establishing a competitive business climate, as well as a friendly regulatory environment of a high standard.”
Looking forward, the Finance Minister said that the government aims to fully exploit newly established European instruments such as “the “Recovery and Resilience Facility”, providing a mix of grants and loans to member states.
“This is expected to be instrumental in the revamping and the resilience of our economy, including actions related to the green and digital economy.
“We believe the additional funds, up to €1 bln allocated to Cyprus, will be key for our economy to become more competitive on the global economic stage.”